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China Automotive Industry Study Report for the Swedish Energy Agency August 2019

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China Automotive Industry Study Report for the Swedish Energy Agency August 2019 BUSINESS SWEDEN CHINA AUTOMOTIVE INDUSTRY STUDY REPORT FOR THE SWEDISH ENERGY AGENCY AUGUST 2019 www.eqtpartners.com An assignment from the Swedish Energy Agency Göran Stegrin, email [email protected] Disclaimer: This report reflects the view of the consultant (Business Sweden) and is not an official standpoint by the agency. BUSINESS SWEDEN | CHINA AUTOMOTIVE IND USTRY STUDY | 2 SUMMARY Economic slowdown and an ongoing trade war with the United States have impacted the Chinese automotive market. In 2018, new vehicle sales declined for the first time in 20 years. Sales totaled 28,08 million units, reflecting a -2.8% y/y. Electric vehicles remain a promising segment, as the government still provides substantial subsidies to manufacturers, while customers are offered incentives and favorable discounts for purchasing. In order to guide the industry, the Chinses government is gradually reducing subsidies. Stricter rules are also set to raise the subsidy threshold, which will force both OEMs and suppliers along the value chain to increasingly convert themselves into hi-tech companies with core competencies. The evolution is driven by solutions addressing the three main issues created by the last decade’s market boom: energy consumption, pollution and traffic congestion. The Chinese government has shifted its attention from total volume to engine mix and is progressively creating incentives to small and low emission vehicles, while supporting investment in new energy vehicles, mainly electric. In this direction, technologies surrounding new energy vehicles such as power cell materials, fuel cell and driving motor will receive strong support and offer more opportunities. In the light weight area, structure optimization is still the primary ways for OEMs the achieve the weight reduction goal. However, efforts in the development of light-weight materials such as aluminum and magnesium alloy as well as carbon fiber are promising with the cost being reduced. With regards to energy-saving technologies for internal combustion engine, although self- developed core technologies such as TDI engine gradually realizes industrialization, there are still gaps with foreign countries in terms of fuel consumption and core component technologies such as electronic control systems. Sweden is a global leader in driving the innovation in the automotive industry. As the home of famous OEMs such Volvo Cars, Volvo Group, Scania, Sweden also fosters a strong supply chain, which is also pushing the industry to achieve the transition towards fossil fuel free fleets and autonomous driving. The reputation and efforts within the above areas have been appreciated by the peers in China. Swedish companies who have strong offerings in the electronic control system, battery storage and management, light-weight materials will find more opportunities to work with Chinese OEMs. BUSINESS SWEDEN | CHINA AUTOMOTIVE IND USTRY STUDY | 3 INDEX BACKGROUND ...................................................................................................................... 5 MOTIVATION AND OBJECTIVE .................................................................................... 5 INTRODUCTION ..................................................................................................................... 5 China Auto Market at a Turning Point ............................................................................. 5 Innovative Technologies Drive the Industry Towards A Green and Smart Transformation ................................................................................................................. 5 The industry is vitalized by the new cooperation, new players and new business model ......................................................................................................................................... 6 MARKET OVERVIEW ............................................................................................................. 7 PASSENGER CAR MARKET AND TRENDS ................................................................. 8 COMMERCIAL VEHICLE MARKET AND TRENDS ..................................................... 11 SEGMENT ANALYSIS AND EVALUATION ........................................................................ 15 Battery Electric vehicle .................................................................................................. 15 Battery systems ............................................................................................................. 18 Fuel cell Electric VEHICLE ............................................................................................ 21 Vehicle lIGHT WEIGHTING .......................................................................................... 22 Internal Combustion engine (ICE) technologies ........................................................... 23 segment comparative analysis and prioritization .......................................................... 24 POTENTIAL INTERESTING PLAYERS FOR SWEDISH AUTOMOTIVE SUPPLIERS ..... 26 SELECTED COMPANIES TO CONTACT ........................................................................... 29 CONCLUSION AND RECOMMENDATION ......................................................................... 30 SOURCES: ............................................................................................................................ 31 BUSINESS SWEDEN | CHINA AUTOMOTIVE IND USTRY STUDY | 4 BACKGROUND MOTIVATION AND OBJECTIVE This report describes the Chinese automotive market, with a focus on new energy, technology and material. It is created at the request of the Swedish Energy Agency in order to help identifying areas with relevance for Swedish expertise, and to serve as the basis for identification of potential opportunities of collaboration between Chinese OEM’s and Swedish scale-ups. Together with the Swedish Energy Agency following priority areas have been identified for further analysis Battery electric vehicles: • Battery systems • Fuel cell electric vehicles • Weight reduction • Internal combustion engine (ICE) technologies The study consists in an overview of the Chinese automotive industry, an analysis of the selected focus segments, and a description of Chinese OEM’s who can be relevant for Swedish companies. INTRODUCTION CHINA AUTO MARKET AT A TURNING POINT China continues to be the world’s largest vehicle market with the Chinese government expecting that automobile output will reach 30 million units by 2020 and 35 million by 2025. After enjoying over a decade of surging growth, the Chinese automotive market is reaching a critical point in its development. Chinese passenger-vehicle sales fell in 2018 for the first time since 1990 as economic uncertainty weighed on consumers. Chinese auto sales in 2018 reached 28.1 million, down 2.8% from 2017, according to the government- backed China Association of Automobile Manufacturers. Passenger-car sales fell to 23.7 million, a 4.1% y/y decline, while commercial-vehicle sales rose to 4.4 million, resulting in a 5.1% y/y increase. Electric-car sales surged ahead, increasing 62% to 1.3 million. A combination of weak consumer confidence and policy changes were key factors contributing to the reduction in sales in China in 2018. With the increasing car park and the economy shift to a “new normal”, the overall market is entering a mature path instead of high-speed growth. The Chinese government opened up the automotive market to foreign companies by cutting the tariffs on automotive products and lifting the cap of foreign investment into the sector. Effective July 1, 2018, China reduced tariffs on imported cars from 25% to 15% of their wholesale value. It also cut tariffs on 218 categories of imported car parts, reducing them to a standardized 6%. Except for special vehicles and new energy vehicles, foreign investment is not allowed to exceed 50% cap of the total investment and can only invest in a maximum of two joint ventures producing the same vehicles. The share limitation for foreign investment in the commercial vehicle sector will be removed in 2020 and the limitation on share and number of joint ventures in the passenger car sector will be removed in 2022. As a result, Tesla decided to establish a fully owned plant in China. BMW also announced to increase its ownership share to 75% in 2022. Removal of foreign ownership cap will allow global automotive companies to be more flexible and agile in terms of investment, strategy and product offerings. INNOVATIVE TECHNOLOGIES DRIVE THE INDUSTRY TOWARDS A GREEN AND SMART TRANSFORMATION BUSINESS SWEDEN | CHINA AUTOMOTIVE IND USTRY STUDY | 5 In 2017, the Ministry of industry and Information Technology (MIIT), the National Develop and Reform Committee (NDRC), the Ministry of Science and Technology (MOST) jointly issued the Mid and Long-Term Development Plan for Auto Industry, aiming to make China a “strong” auto power within ten years. It sees the development of New Energy Vehicles (NEVs) and connected cars as providing an opportunity for China to become a global auto nation and leapfrog in auto development. A number of ambitious targets are also set, relating to the creation of national champions in auto parts and auto brands, connected car technology, driver assistance, and partial/conditional automatic systems for driverless vehicles. Additional guidelines further focus on the sub-sectors of NEV engines, plug-in hybrid engines, fuel cell systems and key components, charging poles, battery manufacturing
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